My understanding in the motivation of POVMs and generalized measurements is that they allow to describe more general measurements than projective ones, if we don't describe the environment around the system we want to measure (if we allow to enlarge the system with an environment, and perform projective measurement on the bigger space, both are claimed to be equivalent).
In different terms, if I give you a density matrix $\rho_S$, and I forbid you to enlarge it with an environment, the set of generalized measurements is richer than the set of projective measurements you can do on this system.
Q1: do you agree so far?
Now, let's assume that I have access to $S$ and the environment $E$ around it. By doing projective measurements on $SE$ ($SE$ is closed), I can indirectly perform measurements on $S$ that couldn't be described by projective measurements on $S$ alone. This is where the notion of generalized measurements, and POVMs is useful.
I call $\\{ A_m \\}$ a family of operators describing a POVM, and I assume this POVM comes from a generalised measurement described by Kraus operators $\\{M_m\\}$ (thus I have $A_m=M_m^{\dagger} M_m$, this is always possible if I define $M_m=\sqrt{A_m}$).
The usual argument to say that every POVM can be seen as a projective measurement on a larger space consists to say that, for the initial state $\rho_S$, the post-measurement state would be:
$$\mathcal{E}(\rho)=\sum_m M_m \rho_S M_m^{\dagger}$$
$\mathcal{E}$ is a CPTP map thus it can be seen as the result of an entangling unitary between $S$ and $E$ (assuming they started in a product state) and a projective measurement done on $E$. I agree that it shows that every POVM can be interpreted as a projective measurement on an enlarged space. More precisely, as an entangling unitary applied on a product state on $SE$, followed by a projective measurement on $E$ alone.
However what I'm not sure to really understand is why every measurement we could conceptually do could be described by a local POVM/generalized measurement (on $S$).
For instance, I could imagine that $\rho_S$ is the reduced density matrix of an entangled state $|\psi_{SE}\rangle$ and I did a projective measuremement on $SE$ with projectors $\\{\Pi_k\\}$ (in general $\Pi_k$ can act non-trivially on the whole space $SE$). The reduced density matrix after the measurement, $\rho'_S$ would be equal to:
$$ \rho'_S= Tr_{E} \left( \sum_k \Pi_k |\psi_{SE}\rangle \langle \psi_{SE} | \Pi_k \right)$$ $$ \rho'_S= \sum_{k,u,v,v'} \langle u | \Pi_k | v \rangle \langle v | \psi_{SE}\rangle \langle \psi_{SE} | v' \rangle \langle v' | \Pi_k | u \rangle$$
In this last equality, the kets $| u \rangle,| v \rangle,| v' \rangle$ represent bases state of the environment.
I don't see how to define a family of local generalized measurement in this case (I'm not sure it is even possible: I think this is closely related to the fact CPTP do not represent the most general evolution on $S$ if $S$ and $E$ are initially entangled).
Q2: If it is not possible, wouldn't this mean that POVM and generalized measurement do not correspond to the most general measurements one can do (on a subsystem $S$ of an entangled system on $SE$)?
In different terms, there would exist measurements on $SE$ which will modify $\rho_S$ in a manner that cannot be described by a generalized measurement process. What disturbs me is that I think I have seen in some research papers some "security proof" for various protocol which assume an operator can do an arbitrary POVM (to show that the protocol is secure against any such attack). But wouldn't what I say here mean that checking security against every POVM is not sufficient? My last question is probably a bit blurry (I would need to find again such papers to make it clear, so you can ignore my last remark while answering if you don't see what I mean).